The Internal Revenue Service issued guidance Tuesday to make temporary changes to section 125 cafeteria plans, with the goal of providing tax relief and flexibility in the midst of the novel coronavirus pandemic. The IRS is extending the claims period for health care flexible spending arrangements and dependent care assistance programs and enabling taxpayers to make mid-year changes to their accounts.
The guidance released Tuesday by the IRS deals with the unanticipated changes in expenses faced by many taxpayers as a result of the COVID-19 pandemic. The IRS is now allowing its previously provided temporary relief for high deductible health plans to be applied retroactively to Jan. 1, 2020, and also increases for inflation the $500 permitted carryover amount for health FSAs to $550.
Mainul is the founder and CEO of Ellipsis Health, whose clinical AI agent Sage is already working alongside care teams to automate outreach, continuously monitor high-risk patients between visits, and surface actionable insights that help care managers prioritize the right interventions at the right time. A prominent voice in the CMS Health Tech Ecosystem, Mainul is a signatory to the White House-backed pledge to build responsible, interoperable conversational AI. He was a Rockefeller Fellow and a contributing member of the World Economic Forum. Mainul has shared his vision for the intersection of technology and human empathy as a lecturer at Stanford University, the University of California, and the Indian Institutes of Technology.
Jessica Martinez is the U.S. policy director at Fireblocks. Previously she served as senior director of government relations at the Blockchain Association, staff director of the U.S. Congress Joint Economic Committee, partner at Franklin Square Group, legislative director and deputy chief of staff in the U.S. House, and special advisor at the Federal Communications Commission.
Lars Holdgaard is the founder of Debitura and has more than 10 years of experience across debt collection, accounts receivable, technology and startups. He previously led product and technology work for software used in financial administration and receivables management.
In Notice 2020-29, the IRS is offering extra flexibility to taxpayers by:
- extending the claims periods for taxpayers to apply unused amounts remaining in a health FSA or dependent care assistance program for expenses incurred for those same qualified benefits through Dec. 31, 2020;
- expanding the ability of taxpayers to make mid-year elections for health coverage, health FSAs and dependent care assistance programs, allowing them to respond to changes in needs as a result of the COVID-19 pandemic; and
- applying earlier relief for high-deductible health plans to cover expenses related to COVID-19, and a temporary exemption for telehealth services retroactively to Jan. 1, 2020.
In conjunction with that notice, the IRS also issued Notice 2020-33, in response to the Trump administration’s Executive Order 13877, which directs the Treasury secretary to “issue guidance to increase the amount of funds that can carry over without penalty at the end of the year for flexible spending arrangements.” The notice ups the limit for unused health FSA carryover amounts from $500, to a maximum of $550, adjusted each year for inflation.
